Latest news with #SteveWebb
Daily Mail
5 days ago
- Business
- Daily Mail
How do I stop my pension being used to promote economic growth - I think Rachel Reeves is ignoring the risks: STEVE WEBB replies
I would appreciate you doing a piece on the recent Mansion House accord. It worries me for my default pension fund investments with my own pension firm (I see they are signing up). I note Rachel Reeves says it will 'boost pension pots', which ignores the downside risk. And I do not want to take part. Are there pension suitable funds out there that I could select that will not take part in this? To be clear I want to stay with my current provider as my pension is still receiving employer contributions. Steve Webb replies: The Mansion House Accord is a voluntary agreement entered into by 17 large pension schemes and pension providers last month. These schemes have signed up to a target that 10 per cent of the money in what are called their 'main default arrangement' (of which more later) will be invested in 'private markets', with at least half of this being in the UK. You can see which schemes have signed up and read the full text of the Mansion House Accord here. There are a few technical terms used in that description which it is worth explaining, as they are relevant to your question. The first is the idea of a 'default arrangement'. This is simply the place where your money is invested unless you make an active choice to do something different. In most schemes, the vast majority of member savings are held in these 'default' arrangements, but there will generally be other options in which you can invest which are not covered by this agreement. The second is the idea of 'private markets'. Historically, a lot of pension money has been invested in things like the major stock markets in the US, the UK and around the world. Large amounts have also been invested in things like government debt (like UK government bonds, called gilts). These types of investment are in 'public markets'. But governments (and pension schemes) are increasingly interested in other ways of investing which they believe have the potential to generate more economic growth (for society as a whole) and potentially better returns to members. This could include investing in start-up or 'early-stage' businesses which are not (yet) listed on stock markets. It could also include investing directly in things like big infrastructure projects such as the upgrade to the national grid needed in the coming decades as the way we power our economy changes. In principle, there is no reason why an allocation to these 'private markets' should be damaging to your pension. Although the costs tend to be higher, the expected return over the long-term is typically also higher. But it is true to say that there is greater uncertainty about those returns, which is why private markets will typically be only a relatively small part of the overall investment mix – 10 per cent in this case. If you read the text of the Accord, you will see that there are several safeguards built in to protect members. Fiduciary duty: The trustees (and others) who oversee your pension have an over-riding duty to put your interests first. The goal of 10 per cent investment in private markets by 2030 is subject to the trustees being confident that in doing this they are still acting in your best interests. Consumer Duty: In July 2023, the Financial Conduct Authority introduced the powerful concept of 'Consumer Duty' which applies to the insurance companies who provide pensions. In simple terms, they now have an over-riding duty to do right by their customers. Although it is pretty shocking that such a rule was needed, it has already had a powerful impact in the financial services sector. Signatories to the Mansion House Accord have said that they will only pursue the 10 per cent target if it is consistent with their responsibilities under 'Consumer Duty'. You can read more about Consumer Duty here. If the Mansion House Accord was simply a voluntary agreement, with schemes only heading for 10 per cent if they were confident it was in the member's interest and consistent with the duty to do right by their consumers, then you could probably be fairly relaxed about all of this. But there is a sting in the tail. The Government is not convinced that the industry will deliver on this goal (partly based on the slow progress on previous similar initiatives) and so are planning to give themselves a power via the recently-published Pension Schemes Bill to force pension schemes to invest a particular proportion of their default funds in private markets. Although the Bill contains a safeguard where schemes can argue that they should be exempt from this if they are convinced it would not be in the members' interests, this is still a pretty big stick, and will put pressure on schemes to hit the target. My personal view is that the Government simply should not be doing this. If the Mansion House Accord is clear that trustees' first duty is to their members, and that schemes should do right by consumers, then I cannot see how the Government can justify a threat to over-ride all of this. In practice however, a 10 per cent allocation to private markets is probably a reasonable enough thing for large schemes to do, and I suspect that most of the signatories were happy to sign up on the basis that they were planning to go down this route in any case. If you remain unhappy, you have the option of simply moving your workplace pension money into one (or more) of the alternative investment choices available. You should be aware that these funds may have higher charges (as they are not covered by the 0.75 per cent charge cap on workplace pensions) and you will need to understand what level of investment risk you are taking on. But you may be reassured to know that you can stay with your current provider but without being bound to remain in the arrangement covered by the Mansion House Accord. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Yahoo
10-06-2025
- Business
- Yahoo
500,000 more pensioners at risk of losing winter fuel payments under Labour
An extra half a million pensioners could lose their winter fuel payments by the end of the decade, new analysis suggests. Rachel Reeves was forced into a humiliating about-turn on Monday after announcing pensioners with incomes of less than £35,000 a year would be eligible for the benefit. It means an extra 7.5 million pensioners will receive the payment, worth up to £300, this year. But experts point out 500,000 of these will lose the payment by 2030, as rising incomes collide with the payment. Officials at the Department of Work and Pensions (DWP) refused to comment on Monday on whether the threshold would be increased in line with inflation or the so-called 'triple lock' each year. Government sources told The Telegraph that no more detail would be provided until the next Budget, when the measure will be evaluated by the Office for Budget Responsibility (OBR). If the threshold remained the same, more pensioners would become ineligible each year as their annual incomes increased. Sir Steve Webb, former pensions minister and partner at pension consultants LCP, said: 'The Government's own figures clearly suggest that they expect the number of losers from the new policy to rise each year. 'With around two million pensioners currently over the £35,000 threshold, this number could easily rise by another half a million by 2030. 'This could end up being another way in which governments use inflation to quietly raise additional revenue year-by-year.' This is not the only form of fiscal drag faced by taxpayers. The income tax thresholds have been frozen until 2027-2028, which will drag more than one million taxpayers into paying additional rate tax. This phenomenon, known as 'fiscal drag', represents a huge stealth tax raid. Income tax thresholds have been frozen since 2021-22, dragging millions of taxpayers into the income tax net for the first time, or into higher brackets. The additional rate threshold was initially frozen at £150,000 before being reduced to £125,140 in 2023. HM Revenue & Customs (HMRC) data via a Freedom of Information request showed that the number of people aged 65 and over paying the top rate of tax more than tripled from 44,000 in 2021-22 to an estimated 137,000 in 2025-26. Sir Steve also questioned the Government's numbers on how much the changed policy would save the Exchequer. He said: 'Our analysis also suggests that the new policy will raise less money next year than the headline figure quoted of £450m. 'Assuming an initial yield of around £350m, roughly two thirds of this will be wiped out by higher pension credit costs. The net revenue from the policy is likely to end up barely a tenth of the amount banked by the Chancellor when she presented her last Budget.' While the Government said that the policy measure would save £450m, it also said that it expected to spend £1.25bn on the payments. Adding the figures together, this would have meant a total saving of £1.7bn if the Chancellor had not reversed the policy. But figures published in last year's Budget suggest that the first time the policy came close to raising £1.7bn was in 2029-2030. In the House of Commons on Monday, shadow secretary for work and pensions, Helen Whatley, said that the policy would save as little as £50m. She added: 'After all this, the savings for the Treasury this coming year may be as little as £50m.' Ms Whatley described the about-turn as 'the most humiliating climbdown a Government has ever faced in its first year in office'. The Treasury was contacted for comment. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Daily Mail
10-06-2025
- Business
- Daily Mail
Is new Winter Fuel Payment £35,000 threshold for an individual or a household? STEVE WEBB replies
Is the new £35,000 threshold per pensioner or per household? Individually both myself and my partner have less, but combined we are over it, so will we receive a Winter Fuel Payment? Steve Webb replies: The Government has announced it is going to change the way Winter Fuel Payments are paid, starting from this winter. Although we are still waiting for some of the finer details, we know enough to have a good idea how the new system will work. The first thing to say is that Winter Fuel Payments will now be paid automatically to all, without the need for a claim. This is essentially how things used to work up until last winter. Even if you didn't get a WFP in winter 2024 because you were not on pension credit, you will get a payment in winter 2025, and don't need to take any action. However, the catch is that for higher income pensioners there will be a claw back. The Government has said the definition of higher income is any individual whose taxable income is above £35,000 per year. This includes things like state pensions, company pensions, annuities, taxable investment income and so on, but not things like tax-free benefits such as Attendance Allowance. Note that as far as we know it is likely the £35,000 figure will be fixed, at least for the next few years. The key point is although Winter Fuel Payments are assessed on a household basis, the means-test will depend on your individual income. If we consider your case as a couple, and assume for now that you are both under 80, in future you will be entitled to £200 in Winter Fuel Payments as a household and this is split as £100 each. Provided that neither of you has *individual* income above £35,000 you will both continue to get your WFPs. This is despite the fact that your combined income is above this level. If one of you had an income above £35,000 then your share of the WFP - £100 in your case – would be clawed back through the tax system. In terms of how this money will be collected, the Government has been at pains to stress that pensioners who do not currently file a tax return will not have to start doing so. Instead, what will happen is that HMRC will do an end-year review of your circumstances and if your taxable income was over £35,000 they will seek to recover your share of the household WFP. If you do not fill in a tax return they will do this by using the 'tax code' which is sent to whoever pays your company pension or private pension. The pension provider will simply deduct an extra £100 from your pension over the course of the following twelve months. I suspect in practice that most people with incomes over £35,000 are either getting a company or private pension (and hence have a tax code) or file a tax return. If neither of these is true then it's likely that HMRC will use the 'simple assessment' system and send an end year tax demand to recover the WFP. Finally, one issue that has concerned people is whether HMRC will be chasing the families of people who have died after receiving their WFP but before it can be clawed back. The Government has said that if this is the *only* outstanding item of tax due then they will not seek to collect it, but if the WFP is simply part of the total outstanding income tax due then it will be added in. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Daily Mail
09-06-2025
- Business
- Daily Mail
Why am I being unfairly penalised over 25% pension tax-free cash after lifetime allowance abolition? STEVE WEBB replies
I retired in 2020 at the age of 60 and took what I understood at the time to be the maximum 25 per cent tax-free cash from two different pension schemes. At the time, everything was handled correctly. However, upon receiving my 2024/25 P60s, I noticed an inconsistency. Both providers listed amounts under the Lump Sum Allowance/Lump Sum and Death Benefit Allowance (LSDBA). One provider accurately reflected the tax-free lump sum I received five years ago. The other reported a significantly higher figure — £47,806 instead of the actual £25,554 I received. This discrepancy amounts to an additional £22,252 being attributed to my Lump Sum Allowance usage. When I queried this with the firm involved, they advised that they used an HMRC-provided formula to convert my previously used Lifetime Allowance percentage into a monetary figure under the new rules. They also stated they cannot amend the reported figure without a transitional certificate or evidence of LTA protection. This raises a concern: why have I apparently lost the ability to utilise the full £268,275 Lump Sum Allowance now available under the new rules? As I understand it, the LTA has been abolished, but limits on tax-free lump sums still exist. However, it seems that my withdrawals are now being recalculated in a way that disadvantages me — even though the amount I actually received hasn't changed. No doubt, many other of your readers will be in a similar position. Steve Webb replies: As you know, in 2023/24 there was a lifetime limit of £1,073,100 on the amount of pension savings you could build up whilst benefiting from pension tax relief. When this Lifetime Allowance was abolished on 6 April 2024, the Treasury was concerned that the cost of pension tax relief could rise sharply if people started to save more into pensions and took more out in the form of tax-free cash (known in the jargon as 'pension commencement lump sums'). To prevent this from happening, the Government introduced some new limits, one of which is the Lifetime Savings Allowance. This is set at 25 per cent of the old LTA, or £268,275, and caps the total amount of tax-free lump sums which someone can enjoy over the course of their lifetime. (Note that different rules apply to those who had registered for different forms of 'protection' under the old LTA regime.) Unsurprisingly, the Government did not want to reset the 'meter' to zero and allow people who might already have taken out tax-free cash to take out *another* £268, 275 tax-free. So, it was necessary to work out how much had already been taken out before the new allowance was created and deduct that figure to give a remaining LSA to be used going forward. You might imagine that HMRC keeps records of all the tax-free lump sums which people have ever taken and so could simply come up with a total for tax-free cash used by 6 April 2024 and tell everyone their unused balance. Unfortunately, the system does not work like that. In the days before the Lifetime Allowance was abolished, the onus was on the individual to keep a running total of the amount of Lifetime Allowance they used up every time they drew on their pension savings. This could be, for example, when they started to receive a salary related pension or when they used a 'pot of money' pension to buy an annuity to go into drawdown. Having recorded the percentage of the LTA which they had used up when they first took a pension, the saver then had to notify the next pension scheme of this percentage when accessing another pension and keep a running total. There was no requirement on individuals or pension providers to keep track of the tax-free lump sums that were taken. The focus was just on the LTA. As the need to keep records was around the LTA, HMRC decided that the amount of your Lifetime Savings Allowance used up prior to April 6 2024 will not be the actual cash amounts of lump sums you took but instead will be 25 per cent of the running total of LTA you had used up on all of your pension withdrawals before that date. In simple cases these two numbers will often be the same thing (as with one of your pensions). But this may not always be the case. There are several reasons for this and you have since told me that these could apply in your case. - You may have chosen not to take the maximum amount of tax-free cash available to you. In this case 25 per cent of the amount of LTA used up would be higher than the actual amount of tax-free cash you have taken. - The way defined benefit pensions used to be scored against the LTA did not always align with the way in which the 25 per cent tax-free entitlement was worked out in such schemes. There could thus be a mismatch between your actual tax-free cash and the figure generated by HMRC's rules. HMRC recognised that it could be unfair to 'score' more tax-free cash against your LSA than was actually taken and so it created the concept of a 'Transitional Tax-Free Amount Certificate' to put this right. In simple terms, provided you have full documentation to show what actually happened, you would be able to get a certificate which shows the actual figure you took out, and it is this figure which would be deducted from the LSA to show what was left. Depending on someone's circumstances, using the actual lump sums taken could increase or reduce their remaining LSA, so care is needed. More detailed rules can be found at this link: Lump sum allowance and lump sum and death benefit allowance: Transitional rules for the tax year 2024-25: Transitional tax-free amount certificates. Given that you accessed both of your pensions before 6 April 2024, I would assume that you could now simply apply for a transitional certificate and provide documentary evidence of the amounts that were actually taken in tax-free cash across your two pensions. This should mean that in the event you take further tax-free cash in future you will have the correct amount of residual Lifetime Savings Allowance. Your experiences do however show the importance both of keeping good records and of being aware of this rule change and taking action (if needed) *before* accessing pensions from April 2024 on. If someone in your position does not get the baseline LSA figure corrected before accessing their next pension after this date, it cannot be corrected afterwards. The rules around the abolition of the LTA are complicated and it can be challenging to grapple with them on your own. Given the large sums of money that can be involved, it is worth readers who are affected considering getting a financial adviser to help them with these matters. Ask Steve Webb a pension question Former pensions minister Steve Webb is This Is Money's agony uncle. He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement. Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock. If you would like to ask Steve a question about pensions, please email him at pensionquestions@ Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons. Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes. If Steve is unable to answer your question, you can also contact MoneyHelper, a Government-backed organisation which gives free assistance on pensions to the public. It can be found here and its number is 0800 011 3797.
Scottish Sun
02-06-2025
- Business
- Scottish Sun
How to boost your state pension for free with 1% trick and get £700 extra a year
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) SOON-TO-BE retirees can boost their state pension for free and get up to nearly £700 extra a year with a simple trick. Many apply for the state pension as soon as they reach the eligible age of 66 (which will rise to 67 by the end of 2028), but if you delay your claim, you could get higher payments. Sign up for Scottish Sun newsletter Sign up 1 Soon-to-be retirees could boost their state pension Credit: Getty You can get an extra 1% for every nine weeks that you delay your claim. That means that for every year you delay, you boost your payout by just under 5.8 per cent. 'Deferring your state pension can be a sensible option if you don't need the income immediately and want to boost the payments you receive later in retirement,' said Jon Greer from the investment platform Quilter. How much will you get? The full new state pension is worth £230.25 a week. That means that over the full 2025-26 tax year, you could boost your payments by about £13.35 a week, which is about £694.20 a year, according to Quilter. These figures are based on the current state pension amounts, but as this increases each year thanks to the triple-lock, the actual amounts you add are likely to be higher. The boosted amount increases each year based on the Consumer Price Index. You may want to consider deferring your state pension if you don't urgently need it, such as if you are still in work. Deferring your pension also has tax benefits, said former pensions minister Steve Webb, who now works at the pensions consultancy LCP. 'Drawing a pension alongside a wage can mean a lot more of your pension is taxed - even potentially at a higher rate - than if you wait until your earnings have stopped.' However, there are risks to consider, said Tom Selby from the investment platform AJ Bell. He said: 'If you die earlier, you might not recoup the state pension income you gave up in return for the increase, so if you have health issues then deferral might not be the best option.' Deferring the state pension could be a big mistake for those eligible to claim Pension Credit - which is a handy benefit worth up to £3,900, which also unlocks the Winter Fuel Payment, worth up to £300. Martin Lewis reveals nearly 800,000 Brits could claim hundreds in free cash - here's how to apply That's because your boosted state pension payments could tip you over the threshold for Pension Credit, which is £227.10 if you are single, or a joint income of £346.60 if you have a partner. If you get the full new state pension, you are already over this threshold. It would take about 17 years to make back a year of the state pension payments lost by deferring, although this does not factor in future state pension rises. Who is eligible? Most people can defer their state pension, but there are some exceptions. Time spent in prison or when you or your partner get certain benefits does not count towards the nine-week deferrals. You cannot build up extra State Pension during any period you get: Income Support Pension Credit Employment and Support Allowance (income-related) Jobseeker's Allowance (income-based) Universal Credit Carer's Allowance Carer Support Payment Incapacity Benefit Severe Disablement Allowance Widow's Pension Widowed Parent's Allowance Unemployability Supplement You cannot build up extra State Pension during any period your partner gets: Income Support Pension Credit Universal Credit Employment and Support Allowance (income-related) Jobseeker's Allowance (income-related) The rules are different if you reached your state pension age before April 6, 2016. Instead of a 1% increase for every nine weeks you delay, you get 1% for every five weeks that you don't claim, and you will be given a choice over how to receive your boosted state pension amounts. You can either choose to get higher weekly payments, or you can opt for a one-off lump sum (although this is only an option if you deferred for at least 12 months in a row). The lump sum payment also includes interest of 2 per cent above the Bank of England base rate, which would be 6.25 per cent. If you choose to get a lump sum fixed payment, consider putting it in a high interest savings account. If you're planning on not touching your state pension until at least another five years, consider investing it to make your money work as hard as you can. How to delay You don't need to do anything to delay your state pension - you simply just don't claim it. When you want the money, you can make a claim on the website. The Department for Work and Pensions will then add the boosted amount onto your payments. The DWP should send you a letter no later than two months before you reach state pension age explaining how to claim it.
